Finance
Senate approves MTEF as oil prices, Naira crash further
Yemie ADEOYE
ABUJA — The Senate, yesterday, approved the Medium Term Expenditure Framework, MTEF, and Fiscal Strategy Paper, FSP, 2016-18 submitted by the Federal Government, basing the financial estimates on oil revenue at benchmark of $38 per barrel and exchange rate at N197/ $1. MTEF and FSP are the three-year fiscal plan from where the annual budget is extracted.
But the international oil prices and the domestic currency market at the parallel segment have all moved against both benchmarks, yesterday.
While the global oil benchmark, West Texas Intermediate and Brent Crude closed, yesterday, at $35.83 per barrel, down by 4.07 per cent and Brent Crude down by 3.25 per cent to $37.20 per barrel, the OPEC reference where Nigeria’s Bonny Light trades also closed lower at $32.6 per barrel, far below the Federal Government’s 2016 budget benchmark.
Similarly, while the official exchange rate has been retained by the Central Bank of Nigeria, CBN, at N197/ $1, the Naira crashed to N270 per dollar at the parallel market, yesterday.
Market operators blamed the continued crash in Naira value at the parallel market on constrains in the supply of the foreign exchange resources coupled with speculations that official devaluation is becoming inevitable following steady decline in foreign reserves and dollar inflow from crude oil sales.
The speculations appeared further fuelled by CBN’s reduction of quantity of foreign exchange supply to Bureaux de Change, BDCs, yesterday to $10,000, down by over 66 per cent from $30,000 per week.
At the backdrop of these developments, President Muhammadu Buhari is expected to present the 2016 budget estimates to the National Assembly on Tuesday for further deliberations and final approval of the 2016 Appropriation Bill.
Single salary account for all employees
Meanwhile, the Senate also approved, yesterday, that the Federal Government should, in 2016, establish a data base and possibly a single salary account for all its employees to help streamline and reduce its personnel cost.
The Senate also urged the government to sustain the implementation of Treasury Single Account, TSA, in 2016 with e- collection platform.
President Buhari had, Wednesday, December 8, forwarded the MTEF and FSP to the National Assembly with far reaching economic proposals including scraping of oil sector subsidy.
President Buhari wrote the National Assembly yesterday, informing it of his readiness to present the 2016 Appropriation Bill to the joint session of the Senate and House of Representatives on Tuesday.
Senate President, Bukola Saraki, who read Buhari’s letter at plenary, said the President had requested to address the joint session of the federal parliament on the 2016 budget at exactly 10:00 am.
The approval of the MTEF and FSP documents were sequel to a report by the Joint Committee on Finance, Appropriations; and National Planning and Economic Affairs by the Chairman, Senator John Owan Enoh.
Recommendations
In the approved MTEF report, the Senate also asked the Federal Government to sustain the current tempo towards increasing Federal Government internally generated revenue and diversification of the economy, as well as the projected increase in oil production from current 1.9 million barrels per day, mbpd, to 2.2 mbpd
Other recommendations of the joint committee as approved by the Senate were: “that the relevant committees of the National Assembly should closely and constantly maintain oversight over the ministries, departments and agencies, MDAs, responsible for implementing special intervention programmes to ensure that the targeted benefits are achieved while safeguarding against abuses.
“The diversification of the economy should be accompanied with economic modernisation such that the economy can be more competitive and productive; arrears of 2015 fuel subsidy for domestic consumption as proposed in the MTEF be sustained;the funding of the infrastructural development stated in the MTEF should be clearly captured in the details of the 2016 Appropriation Bill;
“The National Assembly in close collaboration with the executive should as a matter of urgency consider an accelerated passage of the Petroleum Industry Bill (PIB) particularly those sections with implication on joint venture funding by the federal government (JV Cash Calls).”
In his remarks, Senate President, Bukola Saraki who noted that the contents of the MTEF document had clearly indicated that Nigerians were going to a very challenging times in 2016 because the nation was still practicing a mono economy with a product that we do not control the price, stated: “We must continue to increase our independent revenue, we must make effort to increase our tax revenue and the committees should intensity efforts in their oversight activities.
“We must also work to reduce the level of borrowing and the executive should also comply with the senate recommendations on the MTEF particularly as regards to oil subsidy. The situations in the past where we submit MTEF and we then go to do something completely different I think should not be entertained again.”
The Central Bank of Nigeria (CBN) has refuted claims of devaluing the.
Earlier reports suggested that the CBN had devalued the Naira, lowering its exchange rate from N631 to the dollar, compared to the previous day’s rate of N461.60 at the Importers and Exporters (I&E) window.
However, the Central Bank of Nigeria (CBN) released a statement on Thursday through its Acting Head of Corporate Communications, Dr. Isa Abdulmumin, categorizing the report as false information.
In the statement titled ‘CBN Has Not Devalued The Naira’, he said the attention of the apex bank was drawn to the news report by an Abuja based newspaper edition of June 1, 2023, titled “CB Devalues Naira To 630/51”.
However, the CBN stated categorically that the news report was replete with outright FALSEHOODS and destabilizing innuendos, ‘reflecting potentially willful ignorance of the said medium as to the workings of the Nigerian Foreign Exchange Market.’
“For the avoidance of doubt, the exchange rate at the Investors’ & Exporters (I&E) window traded this morning (June 1, 2023) at N465/USS1 and has been stable around this rate for a while.
“The public is hereby advised to ignore the news report by Daily Trust in its entirety, as it is speculative and calculated at causing panic in the market,” the CBN spokesman added.
He, therefore, advised media practitioners to verify their facts from the Central Bank of Nigeria before publishing in order not to misinform the public.
The interest rate in Nigeria has been raised to 18.5 percent, up by 0.5 percent, from 18 percent where it was pegged in March 2023.
The Central Banks of Nigeria’s (CBN) Monetary Policy Committee (MPC) resolved to this effect at its third meeting of 2023 in Abuja, on Wednesday.
Governor, CBN, Godwin Emefiele, made the disclosure in the communiqué of the MPC’s meeting, thereafter.
While engaging the media at the end of the two-day meeting, Emefiele, said the committee voted to keep the asymmetric corridor at +100 and -700 basis points around the MPR.
In the view of the MPC, rising inflation rate is traceable to the high energy cost and challenges around the supply chain, among others, which lie outside the corridors of the CBN.
Emefiele said, “The current trend in price development would continue to be monitored by the bank with greater collaboration with fiscal authority to address the drivers of inflation.”
Biztellers reports that the CBN had effected six consecutive interest rate increases, which has seen the rate move from 11.5 percent in March 2022 to 18.5 percent in May 2023.
In Nigeria, people have been forced to come up with creative solutions to cope with the effects of inflation and the economic crisis.
These improvised strategies have not only helped individuals save money, but also enabled them to stay afloat during difficult times.
In a concerning development, the recent trend of boycotting the high cost of cooking gas cylinders in Nigeria may pose a greater risk to lives than it does in terms of saving money.
Economy&Lifestyle investigations have revealed that the soaring prices of gas cylinders have reached a point where it has become increasingly challenging for average households to afford them, let alone refill them with gas.
The situation is further exacerbated by the fact that the pump price of kerosene, which would typically serve as an alternative, has become prohibitively expensive.
Upon investigation, it was found that the prices of gas cylinders vary depending on their sizes. A 3kg gas cylinder is priced at N14,000, while a 5kg cylinder costs N16,000. The larger cylinders are even more costly, with a 6kg cylinder priced at N17,000 and a 12.5kg cylinder costing N19,000.
Additionally, the expense continues when it comes to filling these cylinders with cooking gas, as it costs N2,600 for a 3kg cylinder, N5,200 for a 6kg cylinder, N8,950 for a 10.5kg cylinder, and N10,650 for a 12.5kg cylinder.
Consequently, an average household that needs to replace a worn-out 5kg cylinder would have to come up with N20,250 to purchase a new cylinder and fill it with gas, which can be a difficult feat to achieve.
As a result, many people have resorted to refurbishing their old cylinders and trying to use them as best as they can. However, this approach poses a significant danger.
Mrs. Rukayat Adesoji, a trader, shared her experience regarding her gas cylinder, which had become rusted and could no longer stand upright since last month. Due to the exorbitant prices of purchasing new cylinders, she resorted to seeking the assistance of a welder.
The welder patched the legs of the cylinder, repainted it, and ever since then, she has been using the refurbished cylinder for her cooking needs.
She said ““My gas cylinder which was 6kg got rusted and no longer stands erect since last month. When I asked for the price, I was told it was N17, 500. I was discussing it with a friend who advised me to take it to a welder to paint it and construct a new stand. I heeded to her advice and at the end spent just N3, 000 to turn my cooking gas to a brand new.”
Apart from refurbishing cylinders, some people don’t even know when their cylinders will expire. Mrs. Mercy Opara, a hair stylist, falls in that category as she explained: “I am taking my gas cylinder to the welder to spray it for me. It just cost N1, 500.
“The cost of buying a new cylinder is high. I have been using my cylinder for over 7 years and I don’t even know the expiry date. I just pray God blesses me so that I can buy a new one. But this one I am managing will look neat after spraying it for another two years.”
Mr. Adekanbi Joseph, a wielder, said he paints cylinder and “To paint and rebuild a cylinder stand, I charge N4, 500. Many people come here to paint as a new cylinder is now very expensive to get.”
Highlighting the potential dangers of using refurbished cylinders, Mr. Benjamin Hope, the Chief Executive Officer of FKT Cooking gas and general goods, emphasized the risks involved.
He stated that even a brand new cylinder can pose a risk of explosion if the locks are not properly secured after use or if the cylinder filled with gas is moved from one location to another.
He said “A brand new cylinder can explode if the locks are not well keyed after using and if the cylinder filled with gas was moved from one place.
“There are many reasons for the high cost of gas cylinders in Nigeria. One is the cost of importation due to the exchange rate. Another is the increased migration from the use of kerosene to cooking gas which has necessitated increased demand for gas cylinders. You know that in such a case there will be increased importation of cylinders.”he added
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